Vertex Pharma Falls on Halted Trial

Vertex's stock fell $1.06, or 4.3 percent, to $23.52 during afternoon trading. Over the past year, the stock has ranged between $22.92 and $45.38. Merck's stock declined only slightly.

Late Tuesday, Vertex said Merck halted enrollment in the midstage study of a potential leukemia treatment due to a change in the electrical signal of one person's heart.

Vertex and Merck plan a full analysis of all data on safety and effective for the treatment, MK-0457 or VX-680, which is the lead investigational Aurora kinase inhibitor in their collaboration.

Aurora kinases refer to certain enzymes involved in cell division. The inhibitors are designed to kill these cancer cells.

Vertex also said the companies discontinued development of another Aurora kinase inhibitor, MK-6592 (VX-667), after the compound did not meet certain objectives in a Phase 1 clinical study.

In a note to investors, Susquehanna Financial Group analyst Jason Kolbert, who rates the stock "Neutral," said positive developments for Vertex's other cancer drug candidate, VX-689, helped offset the negative news on VX-680.

Vertex said Merck plans to enter early-stage clinical trials in early 2008 for VX-689 in patients with certain types of tumors.

"Our revenue projections for VX-680 were not significant, and this news does not fundamentally alter our views on Vertex," Kolbert said.

The analyst went on to say the most significant issue for Vertex now is the development of the competitive landscape in hepatitis C and the start of a late-stage program, which will affect its oral drug candidate telaprevir, or VX-950.

BMO Capital Markets analyst Jason Zhang said in a note to clients he planned to adjust his models for VX-680 and VX-667.

He noted, however, that the combined value of both programs accounted for only 30 cents per share in the sum of the model. By comparison, he values telaprevir to be worth $32.10 per share.

"As such, yesterday's news is immaterial to Vertex's story and to our Outperform thesis," Zhang said.

Shares of Merck fell $1.06 to $56.86 in afternoon trading.